Money

Your aircraft represents a wonderful business tool but also one of your largest potential exposures to catastrophic loss—one that could wipe out what you have spent years building. The importance of properly insuring against such loss should be obvious. Here’s a look at the most critical coverage types and clauses.

As soon as its first owner departs from the manufacturer’s delivery center, a new airplane technically becomes used (or preowned). For various reasons, however, 10 years after an aircraft’s final production date is generally considered the ­milestone separating “newer” used business aircraft from “older” ones.

Industry experts continue to blame lack of financing for the failure of business jet orders and sales to recover more rapidly since 2008. “Many sales are lost because prospective buyers can’t obtain financing or can’t obtain it on favorable terms,” says Andrew Bradley, president of global sales at Avjet Corporation. Bradley has even seen a bank require its client to buy a newer, significantly more expensive aircraft rather than provide financing for a slightly more than 10-year-old airplane of the same model. Indeed, relatively few business jets acquired last year were financed at all.

What’s the worst thing that can happen to your business jet? You might think the answer is an accident resulting in total loss, but it’s not. If a hangar roof collapses and destroys your aircraft, your insurance should enable you to replace it. On the other hand, if the airplane is only damaged in the incident, the insurer may opt to repair it, leaving you with a jet that operates just fine but has (gasp) damage history.

When you’re evaluating the state of the used-aircraft market, you need to look at more than the percentage of the worldwide fleet that’s currently for sale. You have to investigate availability in a variety of geographical areas and model-year ranges.

To start writing off your newly acquired jet for tax purposes in the U.S. you have to do more than buy it; you have to “place it in service” in your business. In recent years, the availability of “bonus” depreciation has only upped the ante on satisfying this Internal Revenue Service requirement.

It wasn’t until the end of the final quarter of last year that the used business jet market showed clear signs of direction. That’s when inventory moved noticeably lower after peaking at 2,600 in October. Just 60 days later, we were flirting with the 2,500 mark for the first time since the fall of 2008.

Quote/Unquote

“"I've got a list of corporations that have gotten out of their airplanes [because of criticism from politicians]. It is the stupidest thing I've ever seen. When you look at the time and cost savings; it does not make sense not to fly [privately]. You can't let public perception interfere with your business decision to fly. It either is a good business decision or it isn't."”